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Policy of Inflation Targeting in the Presence of Budget Deficits and Hyperinflation: Difference-in-Differences Estimation

In: Regional Studies on Economic Growth, Financial Economics and Management

Author

Listed:
  • Olfa Manai Daboussi

    (Central University-Tunis)

  • Amel Hedhli

    (ISG of Tunis-University of Tunis)

Abstract

The majority of macroeconomic theories assume that budget deficits are the causes of macroeconomic instability and inflation. With the implementation of the inflation targeting strategy, this relationship was limited and sometimes it has not been empirically justified in emerging countries. In this paper, our aim is to show the effect of the inflation targeting policy on inflation or hyperinflation, economic growth and budget deficits. In empirical work, we use a sample of 50 emerging economies, which 30 countries are not yet adopted inflation targeting and 20 countries that adopt this strategy for the period 1980–2014. The findings show that inflation targeting contributes to the reduction of hyperinflation and budget deficits in emerging countries.

Suggested Citation

  • Olfa Manai Daboussi & Amel Hedhli, 2017. "Policy of Inflation Targeting in the Presence of Budget Deficits and Hyperinflation: Difference-in-Differences Estimation," Eurasian Studies in Business and Economics, in: Mehmet Huseyin Bilgin & Hakan Danis & Ender Demir & Ugur Can (ed.), Regional Studies on Economic Growth, Financial Economics and Management, pages 79-89, Springer.
    • Handle: RePEc:spr:eurchp:978-3-319-54112-9_6
    DOI: 10.1007/978-3-319-54112-9_6
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